The Speaker of the House of Representatives, Femi Gbajabiamila, has called on the executive arm of government to adopt a feasible crude oil benchmark in the proposed amendment to the 2020 national budget.
Speaking at a joint meeting of the leadership of the National Assembly and the Minister of Finance and National Planning, Mrs Zainab Ahmed, over the budget proposed amendments, the Speaker said the budget benchmark is so critical, and so important, because once you passed the law it becomes difficult to adjust, “and then what happens to the excess?” he asked.
He pointed out that Nigeria has always had problems with the Excess Crude Account, potentially an account, which according to him, has no backing of the law. “So, let us even assume that the price remains static at $35, that means we have $10 going to the Excess Crude Account which we have no control over in terms of spending, that is why we guard that benchmark price very jealously.
“Is there a possibility of having a proviso built in the budget…So that there can be an automatic kick in if the benchmark price goes beyond $26 or $27. We want you to explore that possibility. So, I think you should study the market and see what happens next week by the time you present the adjusted budget,” Gbajabiamila said.
Speaking on Nigeria’s debt profile, the Speaker said, “I would also want to address the issue of our deficit and tie it with the issue of debt relief. I’m not sure I heard any presentation on how much we owe and how much we are paying back in this budget. The reason I asked is that at the moment, I believe, for want of a better word, some of our creditors are very vulnerable right now. And depending on how you package your case, I believe they should be the ones coming to beg you to take debt relief, if not outright cancellation.”
Earlier, the Minister of Finance, Zainab Ahmed, while briefing the leadership of the National Assembly said, the US$57 crude oil price benchmark approved in the 2020 budget is no longer sustainable. According to her, it is necessary to reallocate resources in the 2020 budget, to ensure the effective implementation of required emergency measures, and mitigate the negative socioeconomic effects of the COVID-19 pandemic.
Ahmed stated that in line with the global economic outlook and relevant domestic considerations, the assumptions underpinning the 2020-2022 Medium Term Expenditure Framework (MTEF) and the 2020 Budget was revised to slash crude oil benchmark price from US$57 per barrel to US$25 per barrel; reduce crude oil production benchmark from 2.18 million barrels per day to 1.9 mbpd.
She added that the federal government also adjusted the budget exchange rate to N360/US$1; and reduced the upfront fiscal deductions by the Nigerian National Petroleum Corporation (NNPC) for mandated oil and gas sector expenditures by 65% from N1.223 trillion to N424 billion.